Over the past decade Bolivia’s dazzling Salar de Uyuni has become one of South America’s most unmissable sights. Millions of tourists have made the journey to see the azure sky of the Andes flawlessly reflected upon the surface of the salt flats, generating countless photos of travellers seemingly walking on air. For some, the reality may be even more impressive than the illusion. Beneath the earth lies up to 70% of the planet’s known lithium reserves, the lightweight metal dubbed the oil of the 21st century.
Powering the future
40 years ago, few would have come into contact with lithium. In the 1970s, the silvery-white metal was classified as a ‘strategic’ material deemed useful for nuclear technology, as well as treating bi-polar disorder among several other ailments. Now, lithium-ion batteries are found in smartphones, laptops and planes, and are expected to power many of the 21st century’s most transformative technologies.
Chile, which may hold up to a quarter of the world’s reserves, has been lauded as the Saudi Arabia of lithium. The country’s reputation for business, low levels of corruption and its favourable climate have allowed it to dominate the market for the past decade. Argentina too, has recently become a major player, with businesses flocking to invest in its developing lithium industry.
However, it is Bolivia, one of South America’s poorest countries, which has yet to engage in the highly lucrative market, that may be responsible for powering the future.
Bolivia on the offensive
Bolivia keeps a tight grip on its lithium; it has been less welcoming to foreign investment than its neighbours. In 2009, President Evo Morales nationalised all of the nation’s natural resources, taking revenge on a history that has often seen Bolivia the victim of serial exploitation.
But Bolivia’s isolated adventure into the lithium industry has not been fruitful. The country’s state-led mining company COMIBOL suffers from a lack of expertise, which has made pilot projects more difficult. After a decade of sluggish development, Bolivia’s lithium output has fallen well short of its goals, producing just ten tonnes per month, and having sold a mere 25 tonnes to China in 2016 for just over $200,000.
However, last year Evo Morales began to take a more proactive stance towards the industry, telling German DPA news agency in July, “we will develop a huge lithium industry, over $800 million has already been made available.” The head of the nation’s lithium company, YLB, added in December that Bolivia was in talks with potential partners hoping to raise up to $750 million, and that a deal could be awarded soon for a 49% stake in a major expansion project.
This recent push is likely in response to the sky-rocketing demand for lithium over the past two years. In 2017, the number of electric cars in circulation passed the 2 million mark, and the International Energy Agency believes that number will reach 140 million globally by 2030. This estimate is based on promises made by Britain and France to outlaw diesel and petrol-based cars by 2040, with India, China, Norway and Germany making similar declarations of intent. As a result, eight years from now demand is expected to exceed 470,000 tonnes, a huge increase from the 35,000 tonnes produced globally in 2016.
As a result of such speculations, the price of lithium has more than doubled in the past two years, from $10,000 to $25,000 per tonne. Bolivia is now looking to cash in on on the supply squeeze.
But despite the enormous quantities of ‘white-gold’ nestled under Bolivia’s Altiplano, finding keen investment is not so easy. In contrast to Chile, Bolivia suffers from a “lack of legal security, weak rule of law, corruption and murky international arbitration measures,” according to the American State Department.
Investor confidence in the country is also low due to fears that assets may be expropriated by Morales. Bolivia’s poor infrastructure poses an obstacle too, though attempts are being made to develop the country’s roads, ports and access to electricity, in order to rival its neighbours.
In addition, Morales wants to develop an industry that keeps Bolivia involved at each stage of the production chain. Unsatisfied with merely exporting lithium, he wants to build battery plants and car factories in Bolivia, creating wealth and employment for Bolivians.
He also stipulates that Bolivia must maintain a majority stake in the project, and that the foreign company guarantees the market for lithium batteries. Such requirements and risks may discourage potential investors.
Environmental conditions are another deterrent to potential investment. Bolivia’s salt flats are at a much higher altitude than those in Chile and Argentina. The wetter conditions mean rain often floods the salt flats, whilst the lithium itself is trapped under much greater quantities of magnesium and potassium, making it harder to extract.
Despite these obstacles, Bolivia’s Planning Minister Mariana Prado recently announced that Germany is interested investing $350,000 in the nation’s fledgling lithium industry, and that negotiations were also ongoing with Russia and China in a deal that would help Bolivia kick-start its lithium production chain.
Too little too late?
If Morales is able to attract lithium investors at its current price, Bolivia’s long wait to kick start the industry may have paid off. However, by waiting this long they have lost ground on their rivals.
Argentina’s new business-friendly government has spent the last few years opening its doors to investment and relaxing its bureaucracy in order to expand its lithium industry. In 2016, the sector attracted $1.5bn and production rose by nearly 60%. Some analysts also believe it will overtake Chile as the world’s primary lithium producer.
However, there is even uncertainty surrounding the future of the lithium market. Some critics have questioned whether the world does indeed need more lithium, pointing towards the fact that the current oligopoly is running well below capacity. If demand does increase, then the current competitors will be able to increase their output to keep new entrants out of the industry. There is also, of course, the possibility that new battery technologies will emerge in the near future.
There is a chance that Morales has timed Bolivia’s entrance perfectly, but the lithium market’s volatility makes it difficult to predict, and the President may have to renege on some of his conditions if he hopes to get the most out of his country’s minerals.
A bright future, for some
Bolivia may one day become a major hub of lithium production. If it is able to effectively engage with the booming industry and lucrative market, then it is likely that the nation’s already growing economy will continue on an upward trend.
This may well bring greater prosperity to the nation but, as is often the case, the extraction of South America’s natural resources may come at the price of those who live off these lands.
Despite agreements to create jobs and make annual payments to local communities on whose land these plants are built, the impoverished Atacamas of Northern Chile have seen little of the riches produced by the lithium industry. Similarly, communities near Salta in Argentina are furious at the damage mining has done to their ancestral lands. They wave banners at the airport reading ‘lithium belongs to the local people.’
Communities living in Uyuni have already seen their way of life shifted by the disappearance of Lake Poopó, once Bolivia’s second largest body of water but which dried up in 2015. The people who live there survived off the lake’s fish, and are unused to land farming in order to sustain themselves. In an already arid area of the world, the absence of water has only made life more difficult. Though Morales’ government has blamed climate change exclusively, others point towards the huge amount of water that the local mines use. In a lithium plant, this can be up to 2 millions gallons a day.
Though it may be their own country that will benefit from mining the land, it remains to be seen if these communities will be appropriately compensated, or whether once again the people that live closest to the minerals are the ones that suffer the most. In either case, the eternal vistas of Salar de Uyuni may soon be accompanied by the sight and sound of lithium being pulled from the earth.